Target Percentages

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QUESTION From: Mihran in NJ

“What are the benchmark financials everyone goes by? As in food %, rent %, labor % etc.?”


HH ANSWER:

This is one of the most common questions I get on a monthly basis and, not to be difficult, but the answer is “It depends”.

It depends upon several factors namely; concept, location, covers, contiguous uses, menu, market draw, etc...

While many may tell you to shoot for the common benchmarks of 20-25% food cost, 5-9% rent, 18-20% labor, etc.. one size does not fit all.

I’ve seen more failures and/or money left on the table due to operators ignoring their MARGINS and/or opportunities to sustain their business on more available volume while remaining inflexible in being tied to unobtainable percentages for their particular concept.

E.G.- I have clients that are paying almost 15 to 20% rent but, knowing that we were going to face that, we developed the concept in this high traffic location to support and justify that #.

I really do prefer a more holistic approach to financials...and that requires a deep dive into any existing or planned project so really can’t say what’s best for you.

I often see operators trying to back into the numbers which sometimes works but is not a reliable method in my opinion.

That being said, I’ve never seen a venture succeed with a 50% food cost or 40% labor.

I’m available for consulting;)

Josh Sapienza